UNCTAD/CFC Workshop on Enhancing Productive Capacities and Diversification of Commodities in LDCs and South-South Cooperation

Geneva21 Mar 2001

May I begin by welcoming all the participants, particularly those who have come from faraway countries, to this important workshop. I would also like to express my sincere appreciation to the Common Fund for Commodities for funding the participation in this event of those of you who do not have a mission in Geneva. This workshop is an excellent example of the traditional and ongoing cooperation between our two organizations. I see it as a laudable model for greater synergy among institutions. It is also gratifying to note the presence of the representatives of a number of international commodity organizations, including the FAO intergovernmental groups, with whom I will soon be holding an informal brainstorming session on future international commodity cooperation and on how to strengthen the effectiveness of our collective work.

There is hardly any need to emphasize the importance of the workshop´s theme. The commodity sector is the backbone of many developing countries, particularly the least developed countries. This also applies to those developing countries that are relatively more advanced and diversified in their economic structure, including my own country, Brazil, and several nations in South-East Asia. In fact, many of these more diversified developing countries have built their success on a well-functioning commodity sector. They have improved their productive capacities and used both the foreign exchange resources and the savings generated by the commodity sector as the basis of their development process. And I believe the same potential exists for the LDCs. Identifying ways and means of enabling these countries to realize this potential will, I hope, be the focus of this workshop. The development of the commodity sector is a definite prerequisite for poverty reduction in the LDCs.

But let us not lose sight of the broader picture. The commodity sector has its own particular problems, not only in the LDCs but in all commodity-producing and -exporting countries, the latter in particular. Declining terms of trade, excessive price fluctuations and stagnant demand for some traditional export commodities of developing countries have long been the subject of international debate and negotiations. Past approaches have not led to definitive solutions. Neither have attempts to shift the responsibility to market forces. Markets are not really free, and market power is unequally distributed among the various actors. I believe the time has come for brainstorming on the best approach to the commodity problems in the current economic and political environments. I cannot think of a group better suited to begin this brainstorming than you, the participants in this workshop.

Let us first acknowledge that, although many problems such as declining terms of trade and price fluctuations persist, the world commodity situation has changed over the last few decades. The structure and content of commodity trade is not the same as it once was. Several products, such as coffee, have maintained their importance for the producing countries but become less significant in world trade because other products, such as fruit and vegetables and other foodstuffs, have experienced a rapid growth. Hence, the importance of diversification. Although there are improvements regarding market access, there is much room for improvement. Moreover, markets have become much more demanding and market structures have changed, making it more difficult to enter markets and participate effectively in them even if access is relatively free. It is not enough to produce; it is necessary to produce what the markets want, and this requires both sufficient quantities and acceptable qualities. Hence, the importance of enhancing productive capacities.

We are observing an increasing demand in developing countries, but at the same time, demand in many developed countries is relatively stagnant for certain products. And this brings us to the importance of South-South cooperation. The expectation is that, as their income levels rise, developing countries will demand more commodities and commodities of better quality. Thus South-South trade will become more important. But South-South relations should not be confined to trade alone, and in that regard the LDCs can learn a lot from the relatively more advanced developing countries. On the world stage in general, but particularly in world commodity markets, small developing countries will have greater weight and bargaining power if they act collectively.

This workshop should focus on the dramatic situation of the LDCs in the area of commodities. In particular, it should discuss why these countries have suffered impressive losses of market shares and competitiveness in an area where they traditionally enjoy both comparative advantages and substantial trade preferences. During the past 25 years or so, their share of the total value of world commodity exports has declined fivefold. The LDCs as a group have moved from a situation of relative self-sufficiency in food to one in which they are significant net importers, with a growing deficit in essential food crops. They have even become net importers of commodities. We must urgently devise concrete and policy-based options to redress these negative and highly disturbing trends.

Workshops like this one are very important for focusing attention on the plight and needs of the commodity sector, and for proposing initiatives at national, regional and international levels. There is a very significant opportunity to turn these proposals into action. The international community is eagerly awaiting the concrete proposals to be discussed at the Third United Nations Conference on the Least Developed Countries, to be held from 14 to 20 May in Brussels. May I therefore appeal to you to discuss and formulate proposals in the form of what we call "deliverables". These should be a few key suggestions in line with the title of this meeting. They may be concrete projects to be financed or policies and actions to be agreed upon at LDC-III and implemented without delay. These deliverables can play a key role in the development process of LDCs. They can have a catalytic effect on national action and international support to unleash the potential of the natural resource endowment and comparative advantage of the LDCs in commodities.